Merger talks brew for Redhook, Widmer

Redhook Ale Brewery in Woodinville plans to start merger talks as early as today with Portland's Widmer Brothers Brewing.

A combination would bring together two of the best-known names in Pacific Northwest craft brewing at a time when competition is pushing the industry to consolidate.

The companies have been close for years. Redhook brews Widmer beer on the East Coast, and they share a sales and marketing operation in the West. More than a third of each company is owned by megabrewer Anheuser-Busch of St. Louis.

"From my perspective, Redhook has been going along very nicely, but there are certainly merits to seeing if there are additional opportunities," said Chief Executive Paul Shipman, who co-founded Redhook in 1981.

None of the companies would say what prompted the merger talks, which were first revealed in a Securities and Exchange Commission filing by Anheuser-Busch on Wednesday. The Anheuser-Busch filing says it anticipates Redhook would be "the surviving company in any transaction" with Widmer.

"We don't know. It could take any shape," said Kurt Widmer, who co-founded the Portland brewery with his brother, Rob, in 1984.

Plans were disclosed after trading hours. Redhook shares ended at $5, down 20 cents, or 3.8 percent.

The talks, which both sides said could begin by telephone as early as today, come after two quarters of profitability at publicly traded Redhook following nine years of annual losses. The company had sales of $30.6 million in the first nine months of 2006.

Widmer is privately held and does not disclose its financial results. Last year, it bought a minority interest in Goose Island Beer, a Chicago-based craft brewery.

"Paul and Rob and I have been friends for almost 23 years, so we've had conversations about a number of things over the years," Kurt Widmer said.

He said Anheuser-Busch is not driving the talks. It is unclear what significance a merger would have for the giant brewer, which declined to comment beyond its filing.

"We're pretty tiny corporate entities relative to Anheuser-Busch," Widmer said.

Shipman blames Redhook's long profitless streak on overbuilding.

"We overbuilt as much as a company can possibly overbuild and survive," he said. "We still have so much capacity, but now it's starting to rationalize for us."

Between 1994 and 1996, Redhook built breweries in Woodinville and New Hampshire and launched national distribution.

"It would've been great if everything had kept growing at 50 percent," said Shipman. Instead, the market for craft beer stagnated.

Shipman says he was "squarely responsible" for Redhook's mistakes, "although I had a lot of smart people cheering me on."

Redhook and Widmer considered a merger in 1996, Shipman said, but it "didn't come together."

"If you name breweries around the Pacific Northwest," he said, "it wouldn't take long before you named one that we had discussions with along the way."

Melissa Allison: 206-464-3312 or mallison@seattletimes.com